The stricken aircraft floats to earth under its parachute. Photo: Claire Hills

"I looked up and the engine started to splutter ... he got it going again and then it went dead," Mr Ross said.

"It then started to go into a spiral. I thought the pilot was going to eject but it all happened too quick. I started yelling out to my wife: 'There's a plane going to crash into the house.'

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"I was shitting myself, then it veered off and crashed about 400 metres away."

Police said the pilot deployed the aircraft's parachute at 1300 metres "following an emergency incident".

Sydney Flying Club president Allan Bligh said Cirrus light planes, of which there are about 200 registered in Australia, have a handle in the cockpit which, when pulled, fires off a cover-plate and deploys a parachute.

He said it was most likely that Saturday afternoon would have been the first time this pilot would have ever used this system.

"Then the aircraft is supposed to drift slowly to the ground but it doesn't always work to that effect - weather and other things can play havoc," Mr Bligh said.

"There are a number of manufacturers who decline to use them and believe a controlled forced landing, which you are taught from your early days of flying, is a far better system than the deployment of a parachute."

As of January this year, Cirrus claimed 85 lives have been saved when pilots or passengers have activated the system.

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Mr Ross said it was "luck" and "skill" that no one was badly hurt either on the plane or in the nearby homes.

"There was no fire. No explosions," he said. "I reckon the pilot did a good job, possibly with a bit of luck and possibly with a bit of skill."

Police said they were investigating the "exact circumstances surrounding the incident".

The Cirrus SR22 that crashed at Lawson is understood to be a demonstration model used to sell the $480,000 planes by an aircraft sales and maintenance company based at Bankstown Airport.

It is not known whether the Sydney company was demonstrating the plane to business prospects.

The plane that landed safely is registered to the parent company Cirrus Design Company in Duluth, St Louis, in the US, according to the Federal Aviation Authority’s register in the US.

The Cirrus planes are the only light planes in the world to come with their own parachute system, something that has helped it become the most popular piston engine plane in the world.

“If they [the passengers] had been in any other aircraft they wouldn’t be going home tonight to their families,“ said a staff member at Regal Air, which sells and does maintenance on the aircraft from its headquarters at Bankstown Airport.

Most of the Cirrus planes in Australia are owned by businesses, which use the planes for trips of up to 1800 kilometres.

Until 2004, Cirrus's fatality rate had been twice the industry average, the company's director of flight operations, Travis Klumb, said in an industry podcast.

The Cirrus fatal accident rate had been about twice the industry average at 2.6/100,000 hours, reported AVWeb.

But by 2013, the Cirrus fatality rate had dropped to 1.01/100,000, below the industry average of 1.2.

A major reason for the fall in fatalities was improved training of pilots in how to deploy the Cirrus CAPS parachute system.

“Eighty-seven people are alive today that, by all measures, would otherwise not be,” a senior executive at Cirrus said.

Correction: Police have revised the number of passengers on the plane from three to two.